Every quarter, Banco de Portugal and the remaining national central banks in the euro area carry out the Bank Lending Survey (BLS). The BLS includes some specific questions on particular topics, such as the impact of the ECB's asset purchase programmes on the banks' financial situation and their credit policy. Euro area banks consider that the APP leads to an improvement in their market financing conditions and their overall liquidity position. The acquisition of public sector securities by the ECB under the APP could justify the decrease in banks’ sovereign bond holdings as a consequence of portfolio rebalancing. The recent decrease in this effect could be justified by the slowdown of the ECB net asset purchases. Also, the APP puts a downward pressure on the yield curve, which leads banks to report a decrease in profitability owing to a decrease in the net interest margin.

In March, the European Central Bank (ECB) announced a set of measures aimed at counteracting the impact of the coronavirus COVID-19 on the euro area’s economies. One of the measures announced was the new programme named Pandemic Emergency Purchase Program (PEPP), which will have an overall envelope of 750 billion euros. Purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing Asset Purchase Programme (APP). This new asset purchase programme is already reflected in the responses for the past six months, as well as, in the banks’ expectations for the next six months.

For more details see Box: “What is the impact of the ECB’s asset purchase programmes on banks?”, published in the Bank Lending Survey of Banco de Portugal, April 2020.

Prepared by Pedro Moreira. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem.

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